Big brands pay even bigger bucks to celebrities to appear in their ads, endorse their products, and be seen wearing or using their products. Despite the cost, 15% of advertisements in the U.S. feature a celebrity, so they must be effective, right?

Well, they can be.

Dissecting Celebrity Endorsements

Marketers are taught the acronym FRED to assess the viability of possible campaigns, and retailers can certainly benefit from this method. FRED stands for:

F = Familiarity of the person endorsing the product or service.

R = Relevance or connection between the celebrity and the product.

E = Esteem: The person’s reputation can help bolster a product.

D = Differentiation, a celebrity can make an advertisement stand apart from others.

Straight away, you can see why retailers would engage a celebrity marketing strategy — a popular personality can enhance and lift the awareness and reputation of a brand endorsed by a well-known personality. However, the tactic doesn’t always work.

Sometimes marketers focus too much on the familiarity of the celebrity and not enough on the connection. Britney Spears’ Pepsi ads are widely considered to have successfully connected the product with youth, but when Toyota hired her to promote their family sedan, the ads didn’t resonate because the relevance and connection between Spears and the product was unclear.

With the rise of social media, many celebrities have taken to Twitter, Facebook, Instagram, and Snapchat to build up esteem and reputation. It makes sense for celebrities to stay connected with fans to stay in demand. And fans love the more personal connection created after seeing their favorite stars live their lives. So, naturally, celebrity endorsements, often in the form of product placement, have moved online as well.

Done right, a celebrity endorsement on social media can increase sales 4% and even bump up share prices. But the price tag for social endorsements is steep — celebrities demand a hefty premium for such social advertising.

A video posted by Kim Kardashian West (@kimkardashian) on Aug 22, 2016 at 12:33pm PDT

Reality star and socialite Kim Kardashian, who boasts tens of millions of followers on Instagram and Twitter, reportedly rakes in $750,000 to $1 million for posting about products through her social accounts. It’s a nice payday for her, but is it effective advertising? Yes, K.K. is a personality with high familiarity and this is differentiated advertising. But not all brands have carefully considered whether she has an authentic, relevant connection with their product. It’s the marketing equivalent of a shot in the dark — you may hit your target after enough tries, but more market intelligence can reward the savvy marketer with efficiency and effectiveness.

Whether online or off, there are countless stories of success and failure when it comes to celebrity endorsements in advertising, but the thinking behind the tactic is sound; and better yet, can be scaled down and used to promote smaller businesses.

Online Influencers

Marketers representing brands for which celebrity advertising was undesirable for budgeting or other reasons, began to turn their eye toward a new type of celebrity — people who rose to fame online first.

With youth demographics in North America, YouTube stars are more popular than some of the biggest names in Hollywood. You probably know who Jennifer Lawrence, Vin Diesel, and Daniel Radcliffe are, but what about Jenna Marbles, Shane Dawson, and Ryan Higa? Teens in the U.S. rank the latter three as more influential than the first three A-list Hollywood celebrities.

Not so long ago, brands could engage these Internet-famous celebrities and reach a younger, growing demographic at a much smaller cost than TV or movie celebrities. However, the heyday of inexpensive internet celebrity endorsements has come to an end. Internet sensations have become stars in their own right, earning millions in annual revenue. Many now command nearly the same prices as “offline” celebrities, making influencer endorsements out of reach for most small companies.

Additionally, studies have found that there are diminishing returns on product mentions as followers of influencers increase. One study demonstrated that Instagram members with under 1,000 followers had a “like” rate double that of those with between 1,000 and 10,000 followers and that likes and comments had, “a similar pattern.” Why? Because as popularity (familiarity) of an influencer increases, relevance can decrease, and soon you’re back to the shot-in-the-dark scenario we mentioned earlier.

Introducing Micro-Influencers

So, if the FRED principle is sound, but celebrity and influencer endorsements are out of reach, what’s a small shop owner to do?

In March 2016, Experticity released a study on what they called micro-influencers; people on social media with a smaller number of followers than influencers, but who had cachet with a focused, niche demographic. The study showed some remarkable results. These micro-influencers are people with more than 500, but fewer than 10,000 followers on social media who are keenly in-tune to what they’re saying on specific topics. Micro-influencers recommended people try or buy products more often than your Average Joe, but rather than coming off as an inauthentic promotion, their followers listen and act on their advice as they would with a word-of-mouth referral from a friend or family member.

Among other findings, the study showed that micro-influencers were asked their opinion on buying a product 22x more than the average person. They were also more likely to have firsthand knowledge about a product or service and were better at explaining how a product could be used.

Why Micro-Influencers Are Worth The Investment

The Word-of-Mouth Effect

Interestingly, the study also found that micro-influencers still tend to make their recommendations face-to-face, even though they are semi-popular online. They do use their social media followers to discuss and recommend products, but they’re in touch enough with their communities offline also that their recommendations become word-of-mouth, which studies have shown is the most effective form of marketing. Almost all (92%) of consumers say that word-of-mouth advertising is more trustworthy than any other recommendations. And more than half (58%) of people say that when someone they know recommends a product or service on social media, friends and family ask for their opinion about brands. Another 88% of consumers say they use both online and offline word-of-mouth together as a source of trusted information — and this is the sweet spot that micro-influencers play into.

With a maximum of 10,000 followers, micro-influencers don’t fit our usual definition of celebrity, whose popularity and familiarity is usually widespread and well known. On the familiarity principle, Marketing-Schools advises, “relatively unknown celebrities are only used to market niche products and speak to very specific demographics” and this is what micro-influencers excel at.

Micro-influencers are big enough to hold sway on a defined topic, but not so big that their relevance to that topic becomes unclear.

Tapping Into a Niche

The micro-influencer is like your neighbor who is a basement sommelier, a part-time fashionista, or backyard barbecue foodie. You trust their opinion on a specific topic, probably more than your other peers on that topic, because you know it’s their passion. Lucky for marketers, digitally savvy micro-influencers share their passions online too and have a decent, dedicated following of people who take their opinions and recommendations to heart.

Recognizing this important outreach lever, brands have started to hire micro-influencers in the way that they reached out to influencers in the past; negotiating incentives (sometimes money, sometimes product) in exchange for a review or endorsement through their social networks. Rather than taking a shot in the dark, deploying a micro-influencer strategy is like taking a small number of shots at a really big, well-lit target.

You’re likely selling your products because you’re passionate about them, and you’re probably not the only one who is. Researching and finding like-minded micro-influencers could be a key marketing strategy for increasing purchasing on your Shopify store. So, how do you do it?

Finding Micro-Influencers

This is the hard part and the biggest downside to using micro-influencer marketing tactics. You are likely going to have to spend some time and effort finding micro-influencers relevant to your products or services and negotiating the fee for social media mention on their accounts.

There are a couple of ways to find micro-influencers:

Do some digging yourself on social media.. This is the cheapest, but most time-consuming option and there’s no guarantee that once you find a micro-influencer that they’re open to product review or endorsement at all. Still, if you’re digitally savvy, a few days searching around Instagram, YouTube, Facebook, Twitter and Snapchat by following relevant search terms, hashtags and related content, you can probably find a few people to reach out to and ask if they’re open to starting the conversation.

Engage your active customers. You may already be catering to a bevy of brand evangelists who are influencers in their own right. If you’re really familiar with your customer base, they are an excellent starting point on the hunt for micro-influencers — you may find some already are clients of yours.

Hire an agency. This is a bit easier on time, but is worse on the wallet. You can engage one of the few micro-influencer services like Gnack, Captiv8 or Parsel.me that have popped up to help facilitate connections between micro-influencers and brands. While these companies will take some fees away from you, they may help to keep you on top of any potential faux-pas including regulatory considerations and changes to social networking rules on branded content, which in most cases now, must be clearly marked as such in posts.

The Potential ROI

The micro-influencer plan has quite a few fans, including Yahoo’s top research scientist Duncan Watts, who said, "If I had a fixed budget, I could get more value from a small amount of very influential [influencers], or a lot of smaller influencers, on Twitter.”

"If you recruit enough people who, on average, influence just one other person, you could get a much better return on investment if you aggregated them and altogether paid them a tenth of what Kardashian gets."

Mavrck, another micro-influencer facilitation platform claims a 300% ROI can be achieved with the strategy. But 300% on how much?

The BBC reports that personalities with 50,000 to 500,000 Instagram followers will post an endorsement for $1,000, so expect to pay under that for a post to a micro-influencer account.

In some cases, you may be able to exchange products and services instead of fees if cash is tight — just remember to give the micro-influencer relevant value for their endorsement. If you’re lucky and they love your product and your company, they may mention you in a post in exchange for some free swag.

Final Word

Micro-Influencers may be the latest trend in social media marketing, but it’s also based on sound principles and can be deployed at scale, from small storefronts to large corporations. It’s something you can try on your own or with some help from companies who are focused on the area. Reaching out to your own best customers may be the best and cheapest way to begin and at the very least the potential return is enough of an incentive to dig deeper and try.

Have you tried micro-influencer marketing? How did you go about it?

About the author

Guinevere Orvis

Guinevere Orvis is a media strategist, former digital producer, and mother of two young kiddos. She holds an MBA from the Ted Rogers School of Management and is enamored with her adopted city of Toronto.